Correlation Between ECGI Holdings and Sonida Senior

Can any of the company-specific risk be diversified away by investing in both ECGI Holdings and Sonida Senior at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ECGI Holdings and Sonida Senior into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ECGI Holdings and Sonida Senior Living, you can compare the effects of market volatilities on ECGI Holdings and Sonida Senior and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ECGI Holdings with a short position of Sonida Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECGI Holdings and Sonida Senior.

Diversification Opportunities for ECGI Holdings and Sonida Senior

0.08

Correlation Coefficient

ECGI Holdings  Sonida Senior

Significant diversification

The 3 months correlation between ECGI and Sonida is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding ECGI Holdings and Sonida Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonida Senior Living and ECGI Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ECGI Holdings are associated (or correlated) with Sonida Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonida Senior Living has no effect on the direction of ECGI Holdings i.e., ECGI Holdings and Sonida Senior go up and down completely randomly.

Pair Corralation between ECGI Holdings and Sonida Senior

Given the investment horizon of 90 days ECGI Holdings is expected to generate 4.67 times more return on investment than Sonida Senior. However, ECGI Holdings is 4.67 times more volatile than Sonida Senior Living. It trades about 0.05 of its potential returns per unit of risk. Sonida Senior Living is currently generating about 0.04 per unit of risk. If you would invest  0.10  in ECGI Holdings on December 19, 2024 and sell it today you would earn a total of  0.00  from holding ECGI Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

ECGI Holdings  vs.  Sonida Senior Living

ECGI Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ECGI Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, ECGI Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Sonida Senior Living

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonida Senior Living are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Sonida Senior is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ECGI Holdings and Sonida Senior

The main advantage of trading using opposite ECGI Holdings and Sonida Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECGI Holdings position performs unexpectedly, Sonida Senior can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sonida Senior will offset losses from the drop in Sonida Senior's long position.

The idea behind ECGI Holdings and Sonida Senior Living pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.